Comment by Ben Shafran, Head of Markets, Policy and Regulation, at Energy Systems Catapult.

Ever feel like so much is going on in the energy sector that it’s hard to keep up? In this short blog I’ve hand-picked a few of the biggest energy policy stories from recent weeks and highlighted how they impact the world of Net Zero energy innovation.

The retail price cap and fuel poverty

The retail energy price cap is set quarterly by Ofgem to reflect underlying energy system costs. The cap has been raised by 10% for a typical dual fuel household for the period October-December. Understandably, this is raising concern about people’s ability to heat their homes in the winter, given that so many are already struggling to pay off energy debt.

The issue has compounded concerns raised by the government’s decision to target winter fuel payments only at pensioners who receive benefits (previously all pensioners were eligible regardless of income). Government messaging has repeatedly highlighted a ‘black hole in the UK’s public finances’, ahead of a budget announcement expected at the end of October. So, it’s fair to expect that there won’t be much public money to spend on addressing fuel poverty this year.

This makes it incredibly important that the public money that is available is used effectively to ‘crowd in’ private investment that helps people stay warm without breaking the bank. Warm Home Prescription® could be one way of doing that. We are trialling our Warm Home Prescription service with Scottish Power. The trial tests how Scottish Power’s requirement to deliver home energy efficiency measures (‘Energy Company Obligation’) could be better targeted to help vulnerable consumers.

2030 clean power target

One of the government’s priority missions is to “make Britain a clean energy superpower.” Central to this, is an ambition to rapidly decarbonise the electricity system, as this will form the backbone of a Net Zero economy.

A ‘Mission Control’ function has been set up within the Department of Energy Security and Ney Zero, to oversee delivery of a clean power system by 2030. And government has now asked the System Operator to advise on the generation mix, network investment, markets, and system operations that could deliver that target. To a degree, this is building on work National Grid ESO has done before, such as identifying the priority grid projects and its annual Future Energy Scenarios publication.

The big unanswered question is what exactly is meant by ‘clean power’? The pathways to decarbonise could be very different depending on whether the aim is to reduce the typical carbon intensity of the electricity system (e.g. zero emissions 99.9% of the time? 95%? 90%? Less?), or reserve unabated gas generation for extreme events.

Contracts for Difference auction

The result of this year’s Contracts for Difference auction revealed that government was able to contract with more than 8GW of new renewable energy projects. More than half of that comes from offshore and onshore wind – the latter would be built entirely in Scotland and Wales, as it was only in July that the government ended the de facto ban on onshore wind developments in England.

Solar power is considered the big winner of the latest auction – as it was last year – with a record of more than 3GW of projects contracted, spread across all parts of Britain.

After failing to secure any offshore wind projects in last year’s auction, the previous government increased the reserve price (maximum permitted bid) for this year’s auction. This appears to have had the desired effect – not only have two offshore wind projects been secured, but the auction clearing prices for wind and solar were comfortably below the reserve prices (albeit higher than in previous auctions).

While all of this is good news, it’s still far too little to deliver the scale of investment needed to fully decarbonise the electricity system. There was a time and a place for Contracts for Difference – but the Catapult has long been advocating for a change of approach, placing the onus on energy retailers to buy an increasing share of clean power over time, linked to Carbon Budgets. This kind of ‘clean energy portfolio’ approach is commonplace in US energy markets, where states like Texas are breaking records in deploying renewables.

Digital spine

Back in 2022, Energy Systems Catapult helped deliver the Energy Digitalisation Taskforce. One of the key recommendations from that work was the need for a single data-sharing infrastructure for energy data – a ‘Digital Spine’ of the energy system. We are very pleased that the government has now taken on board the Taskforce’s recommendations and our subsequent feasibility study as to how to make a digital spine work.

The Department of Energy Security and Ney Zero has commissioned the System Operator to develop a ‘minimum viable product’ of a digital spine – first for a single use case and then for more general use in strategic planning of the energy system. This is a big step forward in the digital transformation of the energy system.